By Phil Stewart and David Alexander

WASHINGTON (Reuters) - U.S. and Chinese defensechiefs may meet in Vietnam next week, the Pentagon saidTuesday, in what would be their first talks since China lifteda freeze on military ties with the United States.

China, whose rapid military expansion has raised eyebrowsin Washington, cut off contacts with the U.S. military earlierthis year after the Obama administration notified Congress inJanuary of a potential $6.4 billion arms package for Taiwan.

China considers Taiwan a rogue province and its protestlasted until an agreement was announced last week to resumehigh-level contacts.

U.S. Defense Secretary Robert Gates would meet his Chinesecounterpart, General Liang Guanglie, on the sidelines of ameeting in Hanoi of defense chiefs from the Association ofSoutheast Asian Nations and eight other invited countries.

"I expect that we will be able to find a time and place tohave such a meeting, and that would be significant," PentagonPress Secretary Geoff Morrell said.

Morrell also held out the possibility that Gates mighttravel to Beijing early next year.

"The Chinese have expressed a desire to host the secretary.They've asked us to look for opportunities in his calendar,"Morrell said.

Ties between Washington and Beijing have been tested thisyear over U.S. arms sales to Taiwan, Internet policy, Tibet,China's currency and Chinese territorial claims in the SouthChina Sea.

TRADE DEFICIT

The U.S. trade deficit with China, totaling $226.9 billionin 2009, has fueled trade disputes.

U.S.-South Korean military drills also have sparked anoutcry in China, despite official U.S. assurances they areaimed at North Korea, not Beijing. The exercises followed thesinking of a South Korean warship, the Cheonan, and have beenbilled as a deterrent to North Korea.

Gates intends to discuss those exercises with South Korea'sdefense chief at the Pentagon Friday, Morrell said.

"He will also reaffirm in the wake of the Cheonan sinkingthat we will not tolerate North Korean provocation andaggression," Morrell said.

Both the United States and South Korea blame North Koreafor the sinking. But the United Nations refrained from blamingNorth Korea outright in its July condemnation of the sinking,in deference to China, the Pyongyang's closest ally.

Last week, the Pentagon announced that lower-level U.S. andChinese officials would meet for talks as part of a maritimeagreement in Hawaii on Oct. 14-15. Officials would then holddefense consultative talks in Washington later in the year.

Close U.S. military ally Japan, where the United States hasaround 48,000 troops, has also held out the possibility of ameeting with China on the sidelines of the Hanoi event.

The two countries are attempting to improve ties that werestrained last month after Japan detained a Chinese fishingtrawler captain who collided with Japanese patrol boats neardisputed islands in the East China Sea.

(Editing by Will Dunham)